Speaker 1: Hello, aud Loots listeners. We recorded an episode with our
Speaker 1: friends over at What Goes Up. It's live today, so
Speaker 1: go check it out. It's called the Adlots Crossover Episode.
Speaker 2: Yep.
Speaker 3: We chatted with the hosts, Mike Reagan and Vildona Hirich
Speaker 3: about a bunch of topics that are near and dear
Speaker 3: to odd Lots listeners, ranging from the growing power of
Speaker 3: organized labor, the trillion dollar coin, evs, bidenomics, and more.
Speaker 1: You can find it on the What Goes Up Podcast,
Speaker 1: available on Spotify, Apple, or anywhere else that you get
Speaker 1: your podcast fix.
Speaker 3: Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 3: Tracy, it feels like there are many things in the
Speaker 3: news these days that are like on the edge of
Speaker 3: reality and frankly science fiction.
Speaker 1: More evidence that we're living in the simulation. Yes, no,
Speaker 1: you're absolutely right. So first of all, we had this
Speaker 1: influx of AI technology. Everyone got very into chat GPT
Speaker 1: and now everyone's talking about future AI applications. And then
Speaker 1: we had let's see, oh, we have the excitement over
Speaker 1: the possibility of a room temperature superconductor. And then even weirder.
Speaker 1: We have a lot of talk about aliens. We had
Speaker 1: the congressional hearings about UFOs recently. I actually saw someone
Speaker 1: tie all of these things together recently. They thought that
Speaker 1: the LK nine to nine coming out like the week
Speaker 1: after the congressional hearings or the week of was evidence
Speaker 1: that there are in fact aliens and the technology has
Speaker 1: come from them.
Speaker 3: So they take that with a grain of likes, like
Speaker 3: left this little trail of yes for us.
Speaker 2: That's interesting.
Speaker 1: Well, I think one of the conspiracy theories is the
Speaker 1: reason it feels like all of this is popping up
Speaker 1: now and sort of going into hyper drive is because
Speaker 1: the uh, I don't know, the powers that be are
Speaker 1: laying the groundwork for us to actually find out there
Speaker 1: are aliens. So they're sort of dripping it out and
Speaker 1: now the pace is picking up, and so it's coming Joe.
Speaker 2: So here's the thing. I do not believe in it.
Speaker 3: I'm like a deep UFO skeptic to the point where
Speaker 3: I've almost like tuned out all the news. If we
Speaker 3: do have a room temperature superconductor, I don't even know
Speaker 3: what that means. Like I see all these people like,
Speaker 3: oh my god, we are so back, this is going
Speaker 3: to change the world. I still don't really understand the
Speaker 3: significance AI. I think it's pretty cool, but I don't
Speaker 3: know what it's going to do and yet in terms
Speaker 3: of the economy. So when you're faced with all these
Speaker 3: sci fi things, Tracy like, what kind of guests do
Speaker 3: you think?
Speaker 2: Who comes to mind? Is someone who talking about Who's the.
Speaker 1: First person I call? Yeah, well, I guess, uh, we
Speaker 1: have the perfect guests.
Speaker 3: We have the perfect guest. We are going to be
Speaker 3: speaking with Paul Krugman, opinion writer for The New York Times,
Speaker 3: professor at City University of New York, of course, a
Speaker 3: Nobel Prize winner in economics. And I read on the
Speaker 3: internet that he was inspired to be an economist because
Speaker 3: of science fiction, at least according to a website I'm reading.
Speaker 3: And so I think to understand the economics, the implications,
Speaker 3: the thoughts are on aliens, AI, superconductors, what they mean
Speaker 3: for the world and the economy. Obviously, the first name
Speaker 3: we calls Paul's. I think this is your first time
Speaker 3: on our podcast. So, Paul, thank you so much for
Speaker 3: coming on.
Speaker 2: Odd lots.
Speaker 4: Oh thanks, I think it is my first time.
Speaker 1: I'm so proud that the first time you're coming on
Speaker 1: all thoughts is to talk about aliens. I'm so happy, I.
Speaker 4: Know, of all the various things we should be talking about.
Speaker 4: But hey, I'm pretty bored with inflation.
Speaker 3: Yeah, that inflation, the FED soft landing fiscal policy, the
Speaker 3: six hundred dollars checks. This recovery versus the other one
Speaker 3: is so boring. It's so tired. Paul. Do you think
Speaker 3: there could be a life elsewhere in the galaxy?
Speaker 4: I would think that it's extremely unlikely that there isn't.
Speaker 4: I mean, it's there is an argument that says that,
Speaker 4: you know, particularly the complex life, may require some very
Speaker 4: very special circumstances, then we might actually be alone out here.
Speaker 4: But that's well, I guess that sounds unlikely. It doesn'tseem
Speaker 4: like that it should be that hard for there to
Speaker 4: be someplace else where complex life has arisen. But here's
Speaker 4: an argument for that don't see very often, which is
Speaker 4: that if there is other intelligent life out there, just
Speaker 4: given the timescale of things, it must have evolved hundreds
Speaker 4: of millions of years before we did. So if there
Speaker 4: are aliens out there, they are if either wipe themselves
Speaker 4: out one way or another or are on a level
Speaker 4: so far beyond us that you know, the meaningful interaction
Speaker 4: is impossible. So in terms of there being actual aliens,
Speaker 4: you know, landing and kidnapping people and all of that,
Speaker 4: that doesn't seem to me to be a very plausible story.
Speaker 1: So can I ask a step back question, which is
Speaker 1: you know, Joe mentioned that he read on the internet
Speaker 1: always a reliable source, that you got into economics because
Speaker 1: of your interest in science fiction. I remember you wrote
Speaker 1: a paper, I think it's a very long time ago,
Speaker 1: a theory of interstellar trade. But why does this area
Speaker 1: interest you? How did you get into you?
Speaker 3: Why did you pretty much?
Speaker 4: Oh? Yeah, so it's very specific. I read as a
Speaker 4: teenager Isakasimov's Foundation novels, and if anybody's ever read the novels,
Speaker 4: they're about how galactic civilization is collapsing but is saved
Speaker 4: by mathematical social scientists. And I wanted to be one
Speaker 4: of those guys. So that's how I got into economics,
Speaker 4: or at least that's the story I like to tell,
Speaker 4: which is also, by the way, why why I cannot
Speaker 4: bear to watch the Apple TV Foundation series, which completely
Speaker 4: ditches the whole premise. There may not be good TV,
Speaker 4: but it has nothing to do with what Isakasimov wrote.
Speaker 4: So but anyway, wait, it was quite specific.
Speaker 1: In science fiction Economists Save.
Speaker 4: The World in one particular, a classic science fiction series,
Speaker 4: and they're not economists exactly, they're mathematical social scientists. But
Speaker 4: you know, that's as close as I could get is
Speaker 4: doing economics.
Speaker 3: You did write a paper, as Tracy mentioned, on interstellar trade.
Speaker 2: What did you What is that all about?
Speaker 3: I mean, like, what is what would make say, interstellar
Speaker 3: trade any different between trade between yous and China.
Speaker 4: It's the paper I wrote when I was very very young.
Speaker 4: I was a frustrated assistant professor, and it finally got
Speaker 4: published decades later. And so with mostly a blowoff steam paper,
Speaker 4: I was having so fun with the fact that, well, look,
Speaker 4: shipping times for interstellar commerce would be very very long.
Speaker 4: You know, not the time it takes to get from
Speaker 4: Sharing High to Los Angeles, but the climate takes to
Speaker 4: cross twenty life years and at that point the interest
Speaker 4: costs on shipping, yes, up in transit are going to
Speaker 4: be a pretty significant part of the expense. But how
Speaker 4: much time is spent on transit Because of the theory
Speaker 4: of relativity we know that the amount of time received
Speaker 4: on the spaceship is going to be different from the
Speaker 4: amount of time perceived on a planet that remains stationary.
Speaker 4: And it's always all kind of silly. But you know,
Speaker 4: as I said, I think in the introduction that that
Speaker 4: the results of this paper will be true but useless,
Speaker 4: which is the opposite of what is typical in economics.
Speaker 3: Wait, I thought that was typical, true but useless. I
Speaker 3: thought that was what's typical in economics. All right, Well,
Speaker 3: I'm sorry not to not to malign the whole profession.
Speaker 4: Sorry, I had some fun and helped helped keep me
Speaker 4: more or less sane during those you know, pre ten
Speaker 4: year years that every academic has to go through.
Speaker 1: Was it pure reviewed, I can't imagine.
Speaker 4: But no. Actually, well, actually I sent it off The
Speaker 4: Journal of Political Economy used to have a joke paper
Speaker 4: section at the end, miscellany. I sent it and the
Speaker 4: then editor didn't get any of the references. There were,
Speaker 4: in fact, references to Isaac Asimov, and so he sent
Speaker 4: why why is the planet named Trantor? And I, you know,
Speaker 4: we need revisions, And I said, I'm not going to
Speaker 4: do that, so I just let it sit. But it
Speaker 4: hits circulated kind of the samisdot for a long time,
Speaker 4: and eventually the Journal of Economic Inquiry contacted me and
Speaker 4: we said, we've heard about this paper you once wrote,
Speaker 4: can we publish it?
Speaker 3: So I feel like not to keep diving onto this
Speaker 3: one paper. But you know, if it if it takes
Speaker 3: an incredibly long time to ship something from here to
Speaker 3: the other planet, is the But the people on the
Speaker 3: ship don't perceive it as long as those of us
Speaker 3: on Earth, right, because time is slower time, Okay.
Speaker 4: And yes, that's the point. If you're traveling at close
Speaker 4: to the speed of light, you can do that, then
Speaker 4: none of this it makes any sense. Then the subjective
Speaker 4: time is going to be much And I actually then
Speaker 4: went on very fancy economic steer improving to say that
Speaker 4: that doesn't matter because the relevant opportunity costs is the
Speaker 4: time it takes on the planet.
Speaker 2: Anyway, I'm looking at it now. I found it online.
Speaker 1: There's some great it's really funny.
Speaker 2: Yeah.
Speaker 1: Also, like in a very dry way, there's a line
Speaker 1: that like interplanetary trade, while of considerable empirical interest, raises
Speaker 1: no major theoretical problems. Among the authors who have not
Speaker 1: pointed this out are Oland and Samuelson. I love that.
Speaker 4: Yeah, Actually, Jeff Frankel, you may know that if Harvard
Speaker 4: wrote it. A sort of companion paper around the same
Speaker 4: time called is Their Trade with Other Planets, in which
Speaker 4: he pointed out that if you sum up total world
Speaker 4: exports and total world imports, you know, countries report the
Speaker 4: amount the export they don't actually match. Oh yeah, and
Speaker 4: that the world as a whole appears to export more
Speaker 4: than it imports. Yeah.
Speaker 3: Every statistical agency around the world wants to flatter their
Speaker 3: numbers of exports and a little bit off the imports.
Speaker 4: I guess, yeah, maybe there there are for right, Yeah,
Speaker 4: and a fair bit yeah stuff that is not Also
Speaker 4: that it's just if you smuggle stuff in past customs,
Speaker 4: it shows up as an export but not as an import.
Speaker 3: Right Anyway, do you pay attention to things like the
Speaker 3: UFO hearings, like right now? Like how engaged are you?
Speaker 3: Like when you see these headlines?
Speaker 4: I think We've got enough. You know, there's enough. There's
Speaker 4: enough weird stuff in the world. Although I will say that,
Speaker 4: by the way, the theory that says that the aliens
Speaker 4: are selectively releasing technologies that's a subplot in the movie
Speaker 4: men in black and I hope people remember this. But
Speaker 4: the agency that employees will smith is how they financed
Speaker 4: themselves by selectively releasing alien technologies. I think that Bell
Speaker 4: Crow was supposed to be one of them about that,
Speaker 4: so that that's so you really should be. It should
Speaker 4: be even more conspiratorial than people are. It's not just
Speaker 4: that the aliens are doing this because they're about to
Speaker 4: be found out. It's that the government agents in black
Speaker 4: suits are selectively releasing these alien technologies.
Speaker 1: Well, let me ask I guess the big question, which is,
Speaker 1: how would you, as an economist, you know, a rigorous,
Speaker 1: well grounded researcher in this field, how would you go
Speaker 1: about thinking or incorporating something like aliens slash alien technology
Speaker 1: into the way you think about the economy.
Speaker 4: Yeah, the aliens, I have absolutely no idea. I mean again,
Speaker 4: it's just if there are aliens out there, if they exist,
Speaker 4: they almost have to be immensely more advanced, basically on
Speaker 4: a different plane. And it's not clear that they would
Speaker 4: have any interest in dealing with us. But the technologies,
Speaker 4: if there are for whatever reason, whether it's they're leaking
Speaker 4: out of Area fifty one where there are really big
Speaker 4: technological things happening. Of course, the technological progress is the
Speaker 4: ultimately the main driver of economic growth. So these are
Speaker 4: important things things if they are if they pan.
Speaker 3: Out, let's talk about technological progress as a driver of
Speaker 3: economic growth because it seems like that. So it's like, Okay,
Speaker 3: there is this thing that people are talking about, which
Speaker 3: is the possibility of superconductors that can exist at room
Speaker 3: temperature instead of really cold temperatures, which supposedly might have
Speaker 3: all kinds of implications for battery tech or power transmission
Speaker 3: or electricity consumption. I don't really totally get it. I'm
Speaker 3: not a signed this, but it seems good. But on
Speaker 3: the other hand, technologies exist and they are exciting, but
Speaker 3: they don't necessarily show up in the economic aggregates. They
Speaker 3: don't suddenly make GDP growth grow from three to three
Speaker 3: percent to ten percent just because there's some new breakthrough.
Speaker 3: Why don't they Why don't we get technological inventions that
Speaker 3: suddenly caused GDP growth to grow at a much faster pace.
Speaker 4: Oh? Well, me, we certainly do get inventions that make
Speaker 4: a difference that show up a lot. I mean, so
Speaker 4: if you think about, yeah, we have a pretty good
Speaker 4: idea there was an acceleration in US productivity growth for
Speaker 4: about ten years from the mid nineties to the mid naughties.
Speaker 4: That was something like one percent a year faster growth
Speaker 4: than before or since, which we think was because business
Speaker 4: finally figured out what to do with it. And some
Speaker 4: of that's the Internet, it's it's just actually some of
Speaker 4: it is finally figuring out how to use barcodes to
Speaker 4: do effective inventory management, you know, more prosaic things. But
Speaker 4: basically there was a clear bump in productivity that's was
Speaker 4: associated with the rise of IT, networks and all of that.
Speaker 4: And you could say, well, that's it. All we got
Speaker 4: was ten years of one percent faster growth. But that's
Speaker 4: a ten percent bigger economy, and there's almost no conceivable
Speaker 4: economic policy that would raise you as growth that much. Right, So,
Speaker 4: even what was relative to a lot of what people
Speaker 4: had hoped for or predicted, even though the results of
Speaker 4: it have been somewhat disappointing, there's still huge relative to
Speaker 4: anything that you know that any presidential candidate could plausibly
Speaker 4: promise to accomplish.
Speaker 1: How good are we at actually measuring technology's impact on productivity?
Speaker 1: Because I remember this was a talking point a few
Speaker 1: years ago the idea that well, technology is in fact improving,
Speaker 1: but the way that it's improving and sort of feeding
Speaker 1: into the economy is not well captured by statistical methods.
Speaker 4: There's actually true levels of that. First of all, the
Speaker 4: way that we actually of measure technology is god awful
Speaker 4: except not clear how else you do it. I mean,
Speaker 4: we think that we have ways of measuring the contributions
Speaker 4: of tangible stuff like an increased stock of capital to
Speaker 4: economic growth. And what economists do is they add up
Speaker 4: all of those things. That's growth accounting, and then whatever's
Speaker 4: left they say that's technology. You know, it's a really
Speaker 4: pretty poor technique. It's basically, technology is the measure of
Speaker 4: what you can't explain otherwise. That's not great. But on
Speaker 4: top of that, then there's the unmeasured. As you say,
Speaker 4: we don't have a very good handle on. You know,
Speaker 4: what is the value of streamed entertainment one way or another?
Speaker 4: You know, for me, I'm really into live musical performances
Speaker 4: and can't get into you know, can't make time in
Speaker 4: my life to go to as many as I would
Speaker 4: like to. But I can watch a lot of live
Speaker 4: musical performances on YouTube. That's a pretty big. I would
Speaker 4: probably be willing to pay thousands of dollars a year
Speaker 4: for that. As it happens, I don't have to pay that,
Speaker 4: but it's and that's not captured by the GDP statistics.
Speaker 4: And there's probably a bunch of things like that. To
Speaker 4: take something that's less sexy, but healthcare, the fact that
Speaker 4: doctors can treat lots of things that were untreatable before
Speaker 4: is a really big thing. But you know, it has
Speaker 4: always been true, but not always, but it's been true
Speaker 4: for a very very long time. You know, if you
Speaker 4: if you start from the late nineteenth century when you
Speaker 4: started to finally get big improvements in public health because
Speaker 4: the people stopped getting their their drinking water from a
Speaker 4: well next to the outhouse, those are huge gains that
Speaker 4: are really not at all captured by our official statistics.
Speaker 4: So probably it's the case. Uh, you know, there's been
Speaker 4: much more economic growth than the numbers show, or the
Speaker 4: much more, much more improvement than the quality of life
Speaker 4: anyway than the numbers show.
Speaker 2: I'm glad you brought up the live music.
Speaker 3: I was talking to Tracy earlier, and I have this
Speaker 3: memory of us running into each other. It might have
Speaker 3: been like twenty eleven or twenty twelve at some conference
Speaker 3: in New York City and everyone else is mingling and
Speaker 3: you were smartly in the corner watching I think a
Speaker 3: live video of the Arcade fire in twenty eleven.
Speaker 2: Twenty jobs.
Speaker 3: Who do you like the days any band wrecks?
Speaker 2: Oh wow, it's fine.
Speaker 4: And I worry when I say this that I'm going
Speaker 4: to insult bands I love by forgetting to mention them.
Speaker 4: But the last concert I went to, which was just
Speaker 4: at the beginning of the summer, was Lark and Poe,
Speaker 4: which is a sisters from Atlanta who do mostly the
Speaker 4: blues and are just incredible. I'm away for the summer.
Speaker 4: I went to a little I won't get undisclosed located
Speaker 4: by way. I went to just a bunch of local
Speaker 4: musicians doing calling themselves the Grateful Dread regularly inspired Grateful
Speaker 4: Dead covers, but which was great fun. But the next
Speaker 4: thing I'm going to do something called a band has
Speaker 4: been around for a while, old War Paint and does
Speaker 4: sort of vaguely psychedelic stuff. I mean, he's saying a
Speaker 4: boy genius. They've been getting quite a lot of play.
Speaker 4: But actually the troubling I like the more intimate concerts. Yeah,
Speaker 4: and the next Boy Genius performance is at Madison Square Garden.
Speaker 4: Sorry that's I love the band, but I wouldn't love
Speaker 4: that experience. So you know, there's a bunch. I mean,
Speaker 4: that's the thing I subscribed to. I think around around
Speaker 4: forty channels on YouTube which are almost all indie musicians
Speaker 4: of one form or another, and.
Speaker 3: I'm gonna have to check out Lark and Poe. I'm
Speaker 3: looking them up now. It looks really good.
Speaker 2: It looks like the kind of thing that I would like.
Speaker 2: I want to go back.
Speaker 3: We're talking about technological impacts on macro, and someone's going
Speaker 3: to get really mad. I've defended the fact the sort
Speaker 3: of famous infamous internet fax machine comment on the sort
Speaker 3: that you made, because it doesn't seem like one percent
Speaker 3: growth even over ten years, is really changes the economy
Speaker 3: like that much or as much as you would think,
Speaker 3: given there's sort of like huge upheaval that we've seen
Speaker 3: that the Internet caused. Like, is there any way to
Speaker 3: sort of know early on or in real time what
Speaker 3: a technology is going to do to the economy or
Speaker 3: is it the only kind of thing where you can
Speaker 3: say afterwards?
Speaker 2: This seems to be what happened here.
Speaker 4: Okay. What people don't know, by the way, is that
Speaker 4: comment about the Internet and the fax machine was in
Speaker 4: the context of a piece that was meant to be funny.
Speaker 3: I've taken a lot of flak on Twitter, Paul, and
Speaker 3: now I'm discovering that I was defending.
Speaker 4: No. I think it is actually defensible, and I will
Speaker 4: agree with you on that. But what was actually happening
Speaker 4: was that was a piece where before I worked for
Speaker 4: The Times, so I was asked to write a piece
Speaker 4: looking back from one hundred years in the future at
Speaker 4: what had happened, and so I wrote that, you know
Speaker 4: a bunch of things, and many of them were deliberately counterintuitive,
Speaker 4: some of which have turned out to be true, and
Speaker 4: some whatnot that they if you want it. The piece
Speaker 4: ends by saying that my day job is working at
Speaker 4: a vernet at a veterinarian, but I'm hoping that this
Speaker 4: piece will get me on the lecture circuit. But the
Speaker 4: other point was, in fact, if you're looking for the
Speaker 4: transformative economic effects of the Internet, they are pretty elusive
Speaker 4: in the data. Actually, take a even more extreme example,
Speaker 4: the smartphones. The iPhone is introduced, I think in two
Speaker 4: thousand and six, and if you look at the official
Speaker 4: productivity numbers, the period since two thousand and six has
Speaker 4: been lousy for productivity. It's been a long productivity drought.
Speaker 4: The boom and productivity such as it was the boom
Speaker 4: let was between about ninety five and two thousand and five,
Speaker 4: which is more much more the fax machine era than
Speaker 4: the Internet era.
Speaker 1: Okay, I have a really basic question, which is, if
Speaker 1: you get a brand new, world changing technology like the
Speaker 1: Internet or say a room temperature superconductor, would that count
Speaker 1: as like an exogenous shock or an indigenous.
Speaker 4: I mean, at some level everything's in dodgeness, right, At
Speaker 4: some level it's all quantum mechanics. But in terms of
Speaker 4: being something that look that the long sweep of technological
Speaker 4: progress that begins in about two centuries ago or a
Speaker 4: bit more, that's clearly endogenous. Given that we had whatever
Speaker 4: it was, the change in mindset, the change in the
Speaker 4: way that people behave that caused the Industrial Revolution and
Speaker 4: everything that followed, then of course there were going to
Speaker 4: be a lot of explorations of new possibilities, lots of
Speaker 4: new technologies. Any individual technology is there's a strong element
Speaker 4: of we stumbled on something, and so when you stumble
Speaker 4: on something that actually has big economic implication, that's even
Speaker 4: more fortuitous. It's really not predictable in advance. Either way.
Speaker 4: You can have something like I think many people would
Speaker 4: have expected to see a much bigger visible impact on
Speaker 4: the economy from smartphones than we appear to have seen.
Speaker 4: But on the other hand, who would have thought that
Speaker 4: shipping containers would matter as much as they have turned
Speaker 4: out to for the global economy. So it's really in
Speaker 4: the sense of being really hard to have predicted either
Speaker 4: that the innovation would happen or that it would matter
Speaker 4: a lot. Yeah, it's it's exogennous for all practical purposes.
Speaker 3: You know, it's really important that we use the same
Speaker 3: gauge and size shipping containers as they do in China.
Speaker 3: I wonder how we would even coordinate that with another planet.
Speaker 3: They might have like a totally different size shipping container
Speaker 3: at their ports. That could be a very difficult container trouble.
Speaker 4: And the trouble is that if they're forty years light
Speaker 4: years away, the negotiations to establish the common standard a
Speaker 4: couple of.
Speaker 3: Millennias, That's what I was thinking, right, Like, it's hard
Speaker 3: enough to come up with common standards here on Earth.
Speaker 3: I want to pivot. I want to ask you about
Speaker 3: AI actually, and I'm curious like people, you know, every
Speaker 3: technology has its things like oh, people worry about which
Speaker 3: jobs are gonna get disrupted and so forth, And then
Speaker 3: with AI, it feels like there's like deeper angst that
Speaker 3: many people have because it can think and it can write.
Speaker 3: And I've expressed my own anxiety like, well, will I
Speaker 3: be out of a job in a few years? Is
Speaker 3: someone who like does words on the internet for a living,
Speaker 3: because chat GPT is pretty good at doing words? Like
Speaker 3: does it feel different to you in some way in
Speaker 3: terms of or is it? Yeah, we have technically you know,
Speaker 3: we are always getting better at things and it's sort
Speaker 3: of part of a continuous process of technological gain.
Speaker 4: Well, this looks like it. Maybe there are things that
Speaker 4: are kind of narrow gauge technologies that affect a very
Speaker 4: particular sector, but not that many peopleeople this stuff. Although
Speaker 4: we're what we're calling AI isn't really arguably, but the
Speaker 4: stuff we're calling AI anyway does look like it's going
Speaker 4: to affect a lot of activities. The pessimists say, or
Speaker 4: the skeptics say, look, it's not really thinking. It's not
Speaker 4: creative or original. It's just sort of processing what other
Speaker 4: people say, and it's just basically super enhanced autocorrect, which
Speaker 4: is all kind of true. But then, how many people
Speaker 4: out there in the real world are in fact being creative?
Speaker 4: How much of the work that we pay people a
Speaker 4: lot of money to do is in fact a lot
Speaker 4: like super expanded or correct? And I think the answer
Speaker 4: is quite a lot. So this is potentially a really
Speaker 4: big thing, and it could displace a lot of jobs.
Speaker 4: And interestingly, it's the jobs that it might displace are
Speaker 4: going to be ones that are kind of high prestige,
Speaker 4: high education. We're a very very long way, as far
Speaker 4: as I can tell, from being able to have robot plumbers,
Speaker 4: but we may be very quite quite close, in fact,
Speaker 4: may already be there to having robot journalists. So yeah,
Speaker 4: this is serious.
Speaker 1: So you obviously talk and write about economic policy quite
Speaker 1: a lot from that perspective. What would be the best
Speaker 1: way to handle AI if you're worried about society, if
Speaker 1: you're worried about things like inequality, what would be the
Speaker 1: best economic policies to put in place?
Speaker 4: I don't think this one calls for a lot of
Speaker 4: remedial policies other than simply having a strong social safety net.
Speaker 4: It's too pervasive and too diffuse. I think you know
Speaker 4: it's something when you have something like it's not technology,
Speaker 4: but in some ways similar. You have something like the
Speaker 4: China Shock, that period of about ten years where we
Speaker 4: had a real surge of import from China. The thing
Speaker 4: about that was actually a number of jobs displaced was
Speaker 4: probably not was a million, between one and two million,
Speaker 4: but they were very concentrated. There were just communities that
Speaker 4: were effectively wiped out. And that's where the idea that
Speaker 4: you probably should have had some kind of remedial policy
Speaker 4: that tried to sustain or at least help these communities
Speaker 4: adjust or help them downsize or something so that the
Speaker 4: social impact would be less. That kind of made sense.
Speaker 4: But now, if you have something that is going to
Speaker 4: be wiping out certain kinds of white collar jobs, but
Speaker 4: more or less evenly across the country, it's not going
Speaker 4: to be doing any a whole lot more or less
Speaker 4: in any particular region. It's not going to be affecting
Speaker 4: any particular social group, except in the sense that it
Speaker 4: may be devaluing certain kinds of higher education. I don't
Speaker 4: think there's much you can do about that, just trying
Speaker 4: to ban the technology altogether, which isn't going to work.
Speaker 4: So I actually not sure that that, aside from the
Speaker 4: fact that we should have a society where you don't
Speaker 4: starve or go without medical care, if technology does have
Speaker 4: to take your job, I'm not sure there's much more
Speaker 4: you can do than that.
Speaker 3: I'm going to break the pattern and actually kind of
Speaker 3: asking a question that might be relevant to the current
Speaker 3: economic data. But I was thinking about going back to
Speaker 3: the nineties and the sort of productivity boom that we
Speaker 3: saw in sort of the mid nineties and beyond. And
Speaker 3: the other thing about that time, beyond just the sort
Speaker 3: of advent of the Internet and a lot of information technologies,
Speaker 3: is it was a strong economy. It was a robust
Speaker 3: it was robust growth, It was robust employment growth. And
Speaker 3: one theory that sometimes gets aired is that productivity is
Speaker 3: downstream of robust growth and tight labor markets, and that
Speaker 3: when there's tight labor markets that firms have to find
Speaker 3: ways to implement new technologies because they can't just hire
Speaker 3: someone cheaply. That forces the sort of like genuine productivity
Speaker 3: gains technology to actually be incorporated. Of course, we have
Speaker 3: very tight labor markets right now in the US. Like
Speaker 3: how much credence do you buy that? I remember Jenny
Speaker 3: Yellen giving a speech and I want to say, like
Speaker 3: twenty fourteen, like the reverse history sists, and this idea
Speaker 3: that like, if we run the economy hot for a while,
Speaker 3: that it can really pay off in terms of these
Speaker 3: productivity gains, and we might be getting a test of
Speaker 3: that now, Like how compelling do you find that?
Speaker 4: It's one of those things where I take it seriously
Speaker 4: and have absolutely no idea whether it's true. There is
Speaker 4: some case to be made that running of the economy
Speaker 4: depressed These two losses that you basically differ make up
Speaker 4: so that a weak economy for a sustained period of
Speaker 4: time leads to lower productivity growth for many, many years thereafter.
Speaker 4: And you can read some of the evidence from the
Speaker 4: two thousand and eight financial crisis in aftermath to say that,
Speaker 4: on the other hand, that isn't always true. The Great
Speaker 4: Depression in the United States appears to have had zero
Speaker 4: impact on all of that. If you look at the
Speaker 4: economy in the late forties, it was just about where
Speaker 4: extrapolating trends from nineteen twenty nine would have led you
Speaker 4: to think it would Denail. It's true that we did
Speaker 4: run a very very high pressure economy for four years
Speaker 4: in nineteen forties, so maybe that was what.
Speaker 2: Actually the original.
Speaker 4: Yeah, I'm not sure if readers will know about that,
Speaker 4: but yeah, the frying pan charts that I've been promoting through.
Speaker 4: But productivities did pretty well even during the thirties, even
Speaker 4: with the very depressed economy. It's possible right now, Denice
Speaker 4: to believe that by running a genuinely full employment economy,
Speaker 4: arguably for the first time since the late Clinton years,
Speaker 4: that we are setting the stage for an era of
Speaker 4: good productivity growth. But I don't know that, and I
Speaker 4: think I can make a firm prediction is that we
Speaker 4: will never know that we were even though, you know,
Speaker 4: looking back ten years from now, if productivity growth was high,
Speaker 4: we won't know whether that was because finally we got
Speaker 4: sufficiently expanised very macro policy or because we just happened
Speaker 4: to luck into getting usable AI for the first time.
Speaker 2: Yeah, Tracy.
Speaker 3: If there's one thing I feel like I've learned from
Speaker 3: you know, sort of covering economics over the last fifteen
Speaker 3: years or whatever, is that debates never actually get resolved.
Speaker 3: It's you can have all the data and then there's
Speaker 3: just two people tell a different story.
Speaker 1: Yeah, no, that is very that's the same.
Speaker 4: Two people selling the same two different stories decade after decade.
Speaker 4: That's what really drives me crazy. It's always the same
Speaker 4: people on the same side. Whatever the data are, it
Speaker 4: doesn't actually speak too well for my profession.
Speaker 1: Wait, since Joe asked a question that brought us back
Speaker 1: to more modern times and more relevant themes, I want
Speaker 1: to ask one too, which is would an alien invasion
Speaker 1: be deflationary or inflationary? Very serious question.
Speaker 4: I think that we can say pretty almost surely with
Speaker 4: the inflationary wars almost always are an uncontested alien invasion.
Speaker 4: I guess it kind of depends on how they run
Speaker 4: the occupation. But actual wars have been in are always inflationary.
Speaker 4: I can't think of one that wasn't They always involved
Speaker 4: big government spending. Actually, they always involve a collision between
Speaker 4: large spending and at least temporarily reduced productive capacity. So yeah,
Speaker 4: you may recall that back when I was desperately leading
Speaker 4: for more fiscal stimulus. Oh that's right, Yes, I said
Speaker 4: that the government should lie and claim that we were
Speaker 4: facing an imminent alien invasion and that in order to
Speaker 4: fight that imminent alien evasion, what we needed was better infrastructure.
Speaker 4: So a big public infrastructure platform. Two, because things that
Speaker 4: people would never agree to simply in order to make
Speaker 4: people's lives that are, they will agree to it in
Speaker 4: order to fight invasion.
Speaker 3: It is interesting the degree, and you definitely see this
Speaker 3: over the last couple of years, the degree to which
Speaker 3: big public investment programs seem to go down easier politically
Speaker 3: if it can be couched in the language of geopolitical conflict.
Speaker 3: And so even like say, like some of the decarbonization
Speaker 3: efforts in the US, the IRA, a lot of it
Speaker 3: is almost either implicitly or explicitly oh because China is
Speaker 3: doing this too, and suddenly that that brings out the
Speaker 3: votes a bit more.
Speaker 4: Well, yeah, I mean we have two big public infrastructure programs,
Speaker 4: well three. We have one which is the straight infrastructure,
Speaker 4: but that was to some extent said well, you know,
Speaker 4: we're falling behind and China need to do something. Then
Speaker 4: we have the Chips Act, which is explicitly about countering China.
Speaker 4: And then yeah, some of the IRA stuff has been
Speaker 4: sold as being a national security concern as well. So
Speaker 4: sure it's crazy, but yeah, in order to provide people
Speaker 4: with just a better economy and a better life, you
Speaker 4: generally can't get that past the depths that's golds unless
Speaker 4: it's in the interest of fighting evil outsiders.
Speaker 2: I want to ask another AI question.
Speaker 3: I mean, I know you say, like, okay, there's not
Speaker 3: some obvious like medial policy, but it is interesting that
Speaker 3: there is this possibility that it disrupts a lot of
Speaker 3: currently like high status jobs, people with a high level
Speaker 3: of education, white color work, et cetera, which I guess
Speaker 3: in people's minds feels different than like a loom on
Speaker 3: you know, a shop floor or something like that, which
Speaker 3: people think, well, this is different in some way. Historically,
Speaker 3: other examples that feel similar were like, no, this really
Speaker 3: disrupted something that at the time was seen as like
Speaker 3: very high status prestige work.
Speaker 4: Well really high status prestige work, I'm not sure, but
Speaker 4: relatively high. I mean people we talk about the Bloodes,
Speaker 4: the Bludyes were not the poorest, least skilled workers. The
Speaker 4: blood Ice were skilled weavers who were actually relatively high waves.
Speaker 4: What had happened was that the factory production of yarn
Speaker 4: had created an abundance of yarn, but the weaving was
Speaker 4: still being done by highly skilled manual workers. Manual workers
Speaker 4: but high high skill. And then along came the power loom,
Speaker 4: and suddenly the relatively high wage workers found their jobs disappearing,
Speaker 4: and that they were the ones who went out and rioted.
Speaker 4: So it's simply not the case that technology is always
Speaker 4: going to favor the higher wage people at the expensive
Speaker 4: lower wage people. And yeah, there's probably a lot of
Speaker 4: quiet stuff in there that this has probably been going
Speaker 4: on to some extent. One of the things that about
Speaker 4: US inequality is that there was a time when people said, oh,
Speaker 4: it's all about education differentials, but the college wage premium
Speaker 4: hasn't really gone up for a long time now. But
Speaker 4: it's also true that a lot of information processing that
Speaker 4: used to require human being either doesn't or can be
Speaker 4: done by fewer human beings because machine assistance helps.
Speaker 1: On the topic of inequality, it does feel like there
Speaker 1: is this pervasive sense that the US economy is doing
Speaker 1: worse in many ways for a large chunk of the population,
Speaker 1: despite everything that we've seen in some of the hard
Speaker 1: data recently, and a lot more discourse about the possibility
Speaker 1: of a soft landing, But what do you think is
Speaker 1: driving that dissatisfaction? And then secondly, you know, how do
Speaker 1: you go about I guess like messaging that the economy
Speaker 1: isn't that bad to the general population so that aliens
Speaker 1: don't feel the need to invade the planet to make
Speaker 1: us all feel better or worse.
Speaker 4: Yeah, it's now it's an interesting question. I mean, if
Speaker 4: you actually are asking about inequality, have recent events hurt
Speaker 4: lower income people more in the higher income That's actually
Speaker 4: not what the data says. If anything. On the contrary,
Speaker 4: what we've seen is is a surprisingly fast narrowing of
Speaker 4: wage gaps. The people at the bottom of the wage
Speaker 4: distribution have done a lot better than the average. You know,
Speaker 4: Aaron Doubay has been doing writing about this. The unexpected
Speaker 4: compression of wage inequality has taken place in the last
Speaker 4: couple of years. So that's not really the story of
Speaker 4: why people are feeling dissatisfied. If I had to try
Speaker 4: to say why people are dissatisfied, what if it is
Speaker 4: that Look, the return of inflation after a generation when
Speaker 4: people just didn't think about it. That was a big
Speaker 4: shock and people are going to take some time to
Speaker 4: recover from it. Then actually I think it's more than
Speaker 4: two things. I'm going to turn Monty Python routine amongst
Speaker 4: the reasons, but then various partisan shit. It's just astonishing
Speaker 4: if you look at the surveys how much it's true
Speaker 4: for both parties, although it's even more extreme for Republicans.
Speaker 4: But an economy that was really great as long as
Speaker 4: Trump was in the White House suddenly becomes terrible, even
Speaker 4: though it's the same economy with a Democrat in the
Speaker 4: white House. But then perceptions are shaped by narratives. There's
Speaker 4: just lots and lots of surveys now which you ask people,
Speaker 4: how are you doing, and they say fine, and how's
Speaker 4: the economy doing, Oh, it's terrible, which is this is
Speaker 4: relatively new in economics, but in other areas we know,
Speaker 4: we see that all the time. I look at crime,
Speaker 4: and an epic decline in crime between about nineteen ninety
Speaker 4: and the mid twenty tens really astonishing, and we have
Speaker 4: still basically have no idea why it happened. But for
Speaker 4: some reason America became a much safer place and all
Speaker 4: through that surveys. If you ask for people what's happening
Speaker 4: to crime, they said it's increasing, Although if you ask them,
Speaker 4: How how do you feel about your neighborhood or your town?
Speaker 4: They were much more favorable. So there's we've got some
Speaker 4: kind of psychology where a lot of people now believe
Speaker 4: that really bad things are happening to somebody else, somebody
Speaker 4: I don't know.
Speaker 3: I hope the media isn't culpable for any of that,
Speaker 3: you know, just going back to your point about how
Speaker 3: things like AI or things that may have compressed education
Speaker 3: labor is like, it's not really that new of a story.
Speaker 3: Germo Ruddy T Domingos, who has been on the show,
Speaker 3: He always likes pointing out that the word computer used
Speaker 3: to refer to a profession that like, there used to
Speaker 3: be like people who's type whose occupation was.
Speaker 1: Computer, human Excel spreadsheets.
Speaker 4: Human Excel Spreadsheeah Richard Fireman, Richard Fiman ran the computers
Speaker 4: at Los Alamos. You've just seen Oppenheimer and the Fireman,
Speaker 4: and actually what is clearly Fireman appears there playing the
Speaker 4: bongos but is not a speaking character. But he ran
Speaker 4: the computer section at Los Alamos, which was a bunch
Speaker 4: of women. How we're actually computing, right?
Speaker 2: Can I ask?
Speaker 3: We sort of glossed over this within the context of
Speaker 3: alien technology, but are you paying attention to the superconductor stuff?
Speaker 3: Like and you know you're really plugged in your online
Speaker 3: You're probably is like online and on Twitter as much
Speaker 3: as me and Tracy is. And you see these videos
Speaker 3: of like a magnet flapping and people are like, oh
Speaker 3: my god, this is like the Holy Grail, Like, how
Speaker 3: do you This is like a question I've been asking everyone, like,
Speaker 3: how do you, as a sort of intelligent, plugged in
Speaker 3: person and try to process what's going on when you
Speaker 3: see things like this happening in the world.
Speaker 4: This one is really hard. I mean, I am extremely online. Actually,
Speaker 4: I hate when when my phone tells me how much
Speaker 4: screen time I've had each day. I often feel that
Speaker 4: I can go online and get reasonably reliable assessments of
Speaker 4: stuff in areas of which I personally know nothing, because
Speaker 4: I kind of think that I do know enough to
Speaker 4: recognize people who have some idea what they're talking about.
Speaker 4: I know what actual research sounds like. This is one
Speaker 4: of those areas where I can't make it out. It
Speaker 4: sounds like there are reasonable people on both sides. There's
Speaker 4: no obvious motivated reasoning driving this, and I'm kind of
Speaker 4: just saying I have no idea, and not only am
Speaker 4: I not entitled to an independent opinion, I don't know
Speaker 4: whose opinion to trust.
Speaker 1: I just have one more sort of theoretical question, getting
Speaker 1: back to the beginning of this conversation and science fiction,
Speaker 1: But what's your favorite economic system in science fiction?
Speaker 2: If you had to choose.
Speaker 4: This, Oh, well, that's interesting. Most science fiction either doesn't
Speaker 4: specify or kind of assumes that it's not very different
Speaker 4: from what we have now, So there are very few
Speaker 4: sort of furious alternatives. If you look at the start
Speaker 4: Trek universe, that appears to be nobody says it, but
Speaker 4: it actually appears to be sort of idealized Marxian socialism.
Speaker 3: Right, that's the one that you always see. I've heard
Speaker 3: that before, that that's like the literally live.
Speaker 4: Long and well, actually that's actually the opposite. The America
Speaker 4: is the country where we we prosper and die and
Speaker 4: die early, but.
Speaker 2: Live short and prosper.
Speaker 4: Yeah, but if we know the replicator, you just say
Speaker 4: tea earl Gray hot and there it is. And supposedly
Speaker 4: it's an economy of total abundance. Although you know, I'm
Speaker 4: occasionally attempted to yell at the screen, but services are
Speaker 4: most of the economy, and replicators can't do that, although
Speaker 4: I guess androids can. But other than that, it's really
Speaker 4: hard to see very much. People are not very original
Speaker 4: in trying to think about economic systems. There is a
Speaker 4: real paucity of ideas for something different. I mean, we've
Speaker 4: seen there's are little sort of central planning fantasies out
Speaker 4: there in economics. There are some people who try to
Speaker 4: invent or some kind of system of points or so on,
Speaker 4: But what they don't seem to realize is that what
Speaker 4: they're actually doing is reinventing capitalism. Other than that, I
Speaker 4: haven't seen a whole lot of interesting speculation. It's possible
Speaker 4: that we've already explored all the possibilities there are, but
Speaker 4: I don't know. It's really the one thing I had
Speaker 4: to see is a fair bit of sort of fairly
Speaker 4: thoughtful science fiction just kind of assumes that the future,
Speaker 4: that future societies have a kind of a Scandinavian welfare state,
Speaker 4: that whatever else there is, there's always basic income to
Speaker 4: fall back on. And actually, if too much too much information,
Speaker 4: but the expanse if you watch that science fiction series,
Speaker 4: which was one of those things where the TV I
Speaker 4: think was better than the novels. But anyway, the Earth's
Speaker 4: economy and the expanse appears to be a kind of
Speaker 4: a UBI society, except that it sounds like what everybody
Speaker 4: receives if they're not employed, and they apparently they have
Speaker 4: mass numbers of people who just have no jobs. But
Speaker 4: what they did, what they get is they get the
Speaker 4: basics to survive in kind rather than in cash. So
Speaker 4: that's a few but it's not a utopia. It's kind
Speaker 4: of portrayed as being kind of grim, but that's kind
Speaker 4: of where if you look for real, seriously alternative economic systems,
Speaker 4: I can't think of one in any of the science
Speaker 4: fiction I've read.
Speaker 3: Paul Krugman is so great to finally have you on
Speaker 3: Odd Lots, and it was so great to talk about
Speaker 3: things that are not just the sort of day to
Speaker 3: day what's the Fed going to do next week? So
Speaker 3: I really appreciate you coming on. That was a really
Speaker 3: fun conversation, so much fun.
Speaker 4: Okay, take care and yeah, that's great, great stock.
Speaker 2: That was fun, Tracy.
Speaker 1: I absolutely love it that Paul Krugman's first appearance on
Speaker 1: this podcast is to talk about aliens. You can't be I.
Speaker 3: Hadn't thought about the challenge that would pose, which is
Speaker 3: at the.
Speaker 1: Time the productivity statistics.
Speaker 3: Yeah, or and the challenge that would pose of like
Speaker 3: well the time, like the rate of interest for people
Speaker 3: in normal time versus like the payment that people would
Speaker 3: demand who are like on the ship itself moving at
Speaker 3: a different time. Very interesting theoretical questions that to his point.
Speaker 3: But I think that probably much of economics does not
Speaker 3: have much practical application.
Speaker 1: You know, it would blow your mind if you start
Speaker 1: thinking what interstellar finance would actually look like, like currency
Speaker 1: exchange markets and things like that, where you have spot
Speaker 1: and forward markets and things.
Speaker 3: Well, anyway, can I just say something, I Foundation for
Speaker 3: Economic something fee dot org, which is Fundation for Economic Education,
Speaker 3: which I think is like this sort of like libertarian
Speaker 3: like pro capitalists, like think Tank, they have a they
Speaker 3: have an article a Star Trek is not socialist, They're
Speaker 3: really like because I did, that was one of the
Speaker 3: first hit first things that came up, is Star Trek
Speaker 3: really socialist?
Speaker 2: Knows So some people push back on that.
Speaker 1: I do think there clearly there's a gap in the
Speaker 1: market for like a really well thought out piece of
Speaker 1: science fiction that's like predic on a very specific and
Speaker 1: creative economic system.
Speaker 3: It's funny to think about like these sci fi writers like, oh,
Speaker 3: it's gonna be a points and blows, like, bro, you
Speaker 3: invented money, you reinvented the dollar.
Speaker 2: Well done, well.
Speaker 1: I mean it does also get back to you know.
Speaker 1: Paul made the point that a lot of science fiction
Speaker 1: seems to default to this idea of Knesyan abundance, right
Speaker 1: like most scarcity, but if anything in twenty twenty three, like, yes,
Speaker 1: there have been a lot of technological advances, but there
Speaker 1: are serious concerns over basic resources and their availability and
Speaker 1: how they're distributed and things like that.
Speaker 3: And services because we have so much good AI, but
Speaker 3: we don't have good robots, and so it's like when
Speaker 3: we talk about like childcare, elder care, etc. It's like,
Speaker 3: we really need these robots to come along, and we're
Speaker 3: going to get that true abundance.
Speaker 1: Hopefully the aliens bring the robots.
Speaker 2: Yes, okay, please bring robots.
Speaker 1: Shall we leave it there?
Speaker 2: Let's leave it there all right?
Speaker 1: This has been another episode of the Odd Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway.
Speaker 3: And I'm Joe Wisenthal. You can follow me on Twitter
Speaker 3: at the Stalwart. Follow our guest Paul Krugman on Twitter
Speaker 3: He's at Paul Krugman. Follow our producers Carmen Rodriguez at
Speaker 3: Carmen Arman and Dashel Bennett at dashbot. And check out
Speaker 3: all of our podcasts at Bloomberg under the handle at podcasts.
Speaker 2: And for our Odlots content, go to.
Speaker 3: Bloomberg dot com slash odlots, where we have transcripts, a blog,
Speaker 3: and a newsletter. And if you want to chat about
Speaker 3: like everything we talked about in here, from energy scarcity
Speaker 3: and abundance to AI to other stuff, check out our
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Speaker 3: twenty four to seven Discord dot gg, slash od loots.
Speaker 2: It's a lot of fun.
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Speaker 1: Thanks for listening in
Speaker 4: In